Australian Property Updates

Property Information & Real Estate Updates

Banks hold worries over viability of development loans

According to reports in the media, at least one of the big four banks is showing hesitation to provide property development loans both residential and commercial, given the perceived risks in many projects.

The Australian reports that according to documents they were able to access at least 61 projects across Australia have been tagged as having retail or commercial areas that are “unacceptable” when it comes to meeting criteria for an investment loan.

The documents were made available to mortgage brokers pinpoint close to 1400 existing and future developments nationwide where the bank will offer home loans only up to 80% LVR.

A large number of these of developments included on the list appear to have caught the bank’s attention as they have apartment sizes of less than 50sq m.

This is not a new situation as banks have been averse to providing home loans for the purchase of small city apartments for quite some years.

Of the 61 developments with retail components that are on the list as being deemed unacceptable for loans, 15 are in NSW and the ACT, 17 are in Melbourne, another 17 in Brisbane, seven in Western Australia, four in South Australia and one in the Northern Territory.

In Melbourne, notable developers with developments on the list include Pan Urban, which has two projects on the list in the Docklands, and MAB Corporation, which has five buildings in New Quay.

In Sydney, the largest developments to appear on the list as having retail or office components that are “unacceptable” for home loans include a Meriton building and a Winten Property Group building.

The retail components of a Citimark project in Brisbane, and Southport Central on the Gold Coast, which was developed by the failed Raptis Group, among other smaller developments, caught the attention of the bank.

All of the listed projects have already been completed and are no longer held by the developer but by institutional or retail investors.